December 07, 2021

ICYMI: Warren Calls for More Robust Antitrust Enforcement to Protect Economy, Consumers, Workers, and Data

Anticompetitive Behavior by Technology Companies Drives Supply Chain Crisis, Increases Prices for Consumers, Exploits Workers, and Weakens Privacy Protections

Washington, D.C. — In case you missed it, during a hearing of the Senate Finance Subcommittee on Fiscal Responsibility and Economic Growth, United States Senator Elizabeth Warren (D-Mass.) questioned witnesses about how consolidation in the technology industry has driven the supply chain crisis, while also giving corporations the ability to hike prices for American consumers, exploit workers, and weaken data privacy protections.

During the hearing, Senator Warren emphasized that instead of reinvesting profits into their businesses and employees, Intel and Amazon rewarded executives and investors while hollowing out their businesses, which left them at risk of supply chain shortages. Senator Warren called out Amazon’s monopoly power that dominates the market to squeeze more money out of consumers and small sellers. Senator Warren also highlighted how Amazon’s monopsony power enables its harsh labor and anti-unionization practices that have resulted in poor workplace protections and worse internal promotion opportunities, particularly for racial minorities and women.

Senator Warren urged Congress to pass stronger antitrust laws, ban mergers involving huge companies, and encourage robust enforcement to protect the economy, consumers, workers, and data. 

Transcripts and videos from three rounds of Senator Warren’s questions and closing remarks below:

Transcript: Promoting Competition, Growth, and Privacy Protection in the Technology Sector
U.S. Senate Committee on Banking, Housing, and Urban Affairs Subcommittee on Economic Policy
Tuesday, December 7, 2021

Round 1 of Questions below and video HERE:

Senator Elizabeth Warren: I want to talk about another aspect of the issues we’ve raised today, and that starts over 100 years ago, when Congress passed our first antitrust laws to protect both local businesses and to protect our democracy from powerful, dominant corporations that would undermine competition, crush workers, and gouge consumers. But starting in the 1970s, our government reversed course. Corporate CEOs and lobbyists pushed the idea that mega-mergers and corporate behemoths were actually good. Economists used complicated models to say, gee, if we just let big corporations get even bigger, they would be more efficient, they would lower prices for everyone, and they would compete better on the world stage. Unfortunately, too often, that is not what happened.

Take the semiconductor industry as an example. Hedge-fund managers took over our biggest chip manufacturer, Intel. Intel grew its market size, cemented its dominant position through anticompetitive and predatory practices. Then, having killed the competition, the managers were free to weaken Intel’s fundamentals with impunity. I’ll give you just one example. From 2001 to 2010, instead of spending more money on innovation, remember, we’re talking about the semiconductor industry, right, you’ve got to stay up. Instead of spending more money on innovation, on new ideas, on more efficient manufacturing here in the United States, Intel’s managers spent $48 billion dollars on stock buybacks. They boosted share prices and executive pay while they hollowed out a once-great company.

So, Mr. Lynn, let me start with you. You know a lot about the semiconductor industry. Did consolidation, particularly the growth of Intel, lead to greater efficiency?

Barry C. Lynn, Executive Director, Open Markets Institute: No, Senator. The opposite.

Senator Warren: Did it lead to lower prices?

Mr. Lynn: Absolutely not, Senator.

Senator Warren: Then did it at least make Intel a stronger competitor on the world stage?

Mr. Lynn: The opposite, Senator.

Senator Warren: So, in your assessment, what exactly did happen as a result of Intel’s growing dominance in its field?

Mr. Lynn: First, one of the things, you mentioned $48 billion dollars that Intel paid out between 2001 and 2010. The dominance allowed them to pay out much more between 2010 and 2020, actually $130 billion dollars over the last 10 years. So the looting and sacking of this corporation grew much faster and more aggressive over the last 10 years. But this results in higher prices for the chips, you know, it results in more power, concentration of power, over workers, and it's not just people on the assembly line, but it's also scientists, it's also the engineers, and this is, these are the people that we count on to develop a better future and we have concentrated power over them until we see less innovation as another effect. The other effects include, you know, this extreme concentration of capacity that we have seen in corporations like TSMC in Taiwan. And this extreme concentration where you have all of a certain kind of chip, you have all your eggs in one basket, it means that the system itself is fragile and subject to catastrophic failure. What you have is the system, it then gives other powerful core countries like China power over the people who depend on that capacity. For instance, by threatening to disrupt shipments in and out of Taiwan. It leads to these massive shortages, these structural shortages that we see, that are leading to the shutdown of assembly lines all around the world, not just in America, but we're talking about, you know, Ford, 50% decline in production of cars in Q2. We're seeing Toyota, 40% decline in production of cars in Q3. Well, this equals vastly higher prices for newer cars, vastly higher prices for used cars, vastly higher prices for rental cars, and a lot of dirtier cars on our streets because we can't replace them with newer cleaner cars.

Senator Warren: So consolidation clearly did not strengthen our semiconductor industry. But consolidation or lack of competitors in this field did create this supply-chain crisis that the pandemic has exposed. And now, as you rightly point out, without semiconductor chips, other manufacturers, like auto companies, can’t meet demand, they’re furloughing workers at the same time that orders are stacking up—all because they can’t get the chips that US manufacturers once supplied all around the globe.

And what has been management’s response to this? The same executives who exacerbated this crisis by failing to properly invest in their operations and infrastructure, now are asking Congress to bail them out so they can make the investments that they should have been making years ago. Excessive concentration is a real problem. It is also a problem in our domestic logistics and supply-chain operations and it applies obviously to Big Tech firms. 

Ms. Brown, I’d like to go to you if I can. During the four and a half years you’ve worked at Amazon, Amazon has grown bigger and bigger. Its profits have skyrocketed. So let me ask, in your personal experience, have Amazon’s logistical operations improved, or have things just gotten worse, and particularly with the COVID crisis. Can you speak to that?

Courtenay Brown, Amazon Associate at Avenel, N.J. Fulfilment Center, Leader with United for Respect: Yeah, absolutely. It's definitely gotten worse as the years have gone on, especially with the pandemic. It's all about pushing out as much as possible for Amazon. It used to be about the quality that we're giving our customers. That was the number one thing. But now Amazon really doesn't care very much. They don't care about how, you know, their workers are trained, it’s all about speed and quantity. So when it comes to my facility, with delivering food, you know, we deliver broken eggs, crushed bread, we end up, you know, sending out a lot of spoiled, you know, food and everything. So a lot of us, we want to do good work, but it's, like, really frustrating because you know, we're at a limit, for, you know, doing such things. And for Amazon, this only means they're getting rich. They preach the customer obsession, but it's not good for customers at all, and it's not good for hard-working people at the fulfillment centers either. Workers cannot do their jobs well because Amazon wants to make more money and that's the bottom line for them. Just about as much product as they can get out and more money and if you attempt to try and do, you know, these things like give customers good quality, actually practice customer obsession, you end up actually getting written up and then eventually terminated. So the bottom line is, for them, it's all profit.

Senator Warren: Thank you so much, Ms. Brown. Amazon’s profits have exploded during the pandemic, even though deliveries have been significantly delayed and their services have become more expensive.

In a competitive marketplace, Amazon’s rivals would be able to compete on these factors—providing more reliable service, or lower prices, or better worker treatment. But because there’s no competition, consumers get higher prices and worse services, while Amazon gets even richer.

Markets can produce lower prices. Markets can produce more reliable products. Markets can produce robust supply chains, but only if there is competition. When giants are allowed to dominate an industry, everyone else pays. 

Thanks very much. Senator Cassidy, I recognize you. 

Round 2 of Questions below and video HERE:

Senator Warren: So, as Attorney General Racine pointed out, Amazon controls 50-70% of the $430 billion dollar market online for consumer goods. Prices for everything from lightbulbs to mattresses to motor oil are going up on Amazon, and the question is, why is that happening? A huge part of the reason is Amazon’s deliberate exploitation of its market dominance to squeeze more dollars out of consumers and third-party sellers alike, in other words, Amazon’s taking a big bite out of the middle. So one of our witnesses, Attorney General Racine, filed a lawsuit this year against Amazon for this very reason, and a particular focus of the lawsuit is the impact of something that Amazon calls its Fair Pricing Policy, and if I can, Attorney General Racine, I'd like to follow up on the example you gave to illustrate this policy. So let's say if I make earphones and sell them for $100 on my own website - I just want to make sure we're clear on all this - if I want to sell them on Amazon to access this huge marketplace online and extend my reach, I have to pay Amazon's fees and agree to their terms. And my understanding is that Amazon's fees can be as high as 40% of the cost of these goods. So thanks to these fees, let's just pick that example, I have to increase my prices to ensure that I can still turn a profit. So now instead of charging $100 for these earphones, I may now have to charge $140. But the worst part is, I now also have to charge $140 on my own website, and on every other platform where I'm trying to sell my headphones. These inflated prices crush American consumers. So, Attorney General Racine, I want to return to your opening remarks. I wanted to go back over the example you talked about, but you also mentioned how Amazon forces wholesalers to pay more as well. So I did the consumer part just there. Can you say a little more about how they're doing this with other wholesalers as well?

Karl Racine, Attorney General of the District of Columbia: Sure. And you've captured it exactly right, Senator, which of course is no surprise to me. With respect to wholesalers, Amazon, again, forces these first-party sellers, I'll call them, to reach an agreement with them in regards to what the price is going to be. And here's the deal: if Amazon lowers its retail prices to match or beat a lower price for that initial good on the online marketplace, the wholesaler is forced to pay Amazon the difference between the agreed upon profit that they made, that they entered with Amazon, and the money that Amazon realizes after it lowers the retail price. In short, Amazon has profit protection at the cost of the first-party seller. I do feel compelled to also mention, and don't take my word for it, look at the April 23, 2020 Wall Street Journal article written by Dana Matteoli, that talks about how Amazon has scooped up data from its own sellers, these first-party sellers, to launch competing products. So not only are they crushing these first-party sellers with these unlawful agreements, that's what we allege, but they're also using data around the popularity and selling of these products to launch competitive products against these first-party sellers. Amazon can't win enough without cheating, and that's why we're suing them.

Senator Warren: So, you know, this just knocks me out. In a typical collusion case, like price-fixing, competitors illegally agree to charge higher prices, and when they get caught, they can actually go to jail under federal law. But Amazon accomplishes the same thing in-house and its higher fees are inflating prices on its own platform as well as in stores and other websites through these anticompetitive contract provisions with third-party sellers. And the result is prices go up for millions of Americans and Americans can’t see it because there's no place else to do the price comparison to see what's happening here. You know, this price increase is entirely hidden from consumers, the price looks the same wherever they go. And it just shows up as inflation. And Amazon —

Attorney General Racine: Senator, can I give you numbers?

Senator Warren: Please.

Attorney General Racine: Because I think it's gonna make your point. So between 2014 and 2020, Amazon's revenue from third-party seller fees and charges grew from $11.75 billion dollars to over $80 billion dollars. This year, Amazon is estimated to reap over $121 billion dollars in fees from third-party sellers. They're doing this because it's extremely profitable. They don't care that consumers are paying far too much for goods, and they are not doing what they say they're doing, which is focusing 100% on consumers. They're focused 100% on utilizing their market power to extract every bit of profit that they can. 

Senator Warren: So the question, obviously, you have to ask, is how do they get away with this? And what I would want you to focus on if you can, Attorney General Racine, is how Amazon's dominant market position contributes to this kind of pricing power that's then felt throughout our economy. 

Attorney General Racine: Well, I think the example with the headphones that I gave and that you accentuated, frankly, and made better, is the best example. And that is that what Amazon does is it artificially builds its commissions and fees into a product, it ensures that that embedded profit that it has, frankly, continues throughout the electronic mini-mall, or major-mall, in such a way that no one, not even you, nor me, the creator of our own headphones, can sell our headphones for cheaper than what Amazon and we essentially were forced to agree to sell it at. And why do we engage in that agreement? Because they own 50-70% of the marketplace. Look at it as a tollbooth keeper. If the road only leads to the tollbooth, the tollbooth keeper can raise those prices, and you as the driver have no choice but to pay whatever they’re asking if you’re trying to get down that road. And we think that’s illegal, we appreciate the work of this great committee, we’re going to make law in the courts, and we look forward to helping with respect to legislation. 

Senator Warren: Well, I very much appreciate that, because — I appreciate your point about 50-70% of the marketplace that they already own, and yet, Amazon keeps growing. And they don’t just grow by sales, they continue to acquire. So back in May, Amazon announced its proposed acquisition of MGM Studios – that would be an $8.45 billion dollar deal. Now, I wrote a letter to the FTC Commissioners asking them to review the deal thoroughly and to evaluate how the deal might affect workers and prices in other markets in the Amazon ecosystem. Mr. Lynn, even if the FTC wanted to oppose this huge merger, it would be a challenge to successfully block it, notwithstanding everything that we’ve already heard from the Attorney General and that others have testified about — can you explain why that is? 

Mr. Lynn: Yes, thank you, Senator. Well first, it’s going to be very expensive in terms of the time for this limited staff that the FTC has. I mean, they’re going up against the richest corporation in the world, the most powerful corporation in the world, you know, a corporation that can throw wrench after wrench after wrench into the mechanism. It’s also very expensive in terms of the expertise they have to pay for, economic expertise. And they have to put millions and millions of dollars, often, into the kitty to pay for economists. And this is even with President Biden’s renunciation of the board consumer welfare philosophy, the legacy, because of the nature of the law, the legacy of the consumer welfare philosophy and this focus on efficiency continues to shape how the judiciary is going to look at this issue, and they have to be ready with this very expensive expertise. Third reason, it’s just very difficult to communicate with judges in the stylized language of consumer welfare, of efficiency. You know, it’s like, this is an issue of power, it’s an issue of democracy, it’s an issue of human liberty. And they’re being said, we have to talk about this in terms of efficiency. You know, judges are trained to use common sense, to enforce the law, to ensure rule of law, and when you’re using consumer welfare framing, you’re speaking in nonsense.

Senator Warren: Well, I really appreciate that. You know, you noted earlier that President Biden has selected two outstanding experts — Lina Khan and Jonathan Kanter — to lead the antitrust efforts at the FTC and at DOJ. These are people who believe in competition, and they’re going to build strong cases, but Congress needs to do its part. We need to make sure that they have the resources and we need to make sure that they have the tools to be able to wage these battles. Otherwise, we’re just going to continue to see companies like Amazon squeeze consumers, no matter who’s President or no matter whatever crisis of the day we are dealing with, so I think it’s important that we step up on our side too. Thank you. Senator Cassidy, back to you.

Round 3 of Questions below and video HERE:

Senator Warren: Thank you for being such a great partner on this, I really appreciate it, Senator Cassidy. Like you, I’m delighted with the witnesses that you’ve invited today, to learn from them, and hope we’ll have many follow-up questions for the record here. So thank you for your partnership, this is just the opening round, and we’ll keep going on this. I’ve got one more round of questions I’d like to be able to ask right now. 

What I’d like to do now is focus a little bit about market dominance and the impact on workers. For too long, our antitrust policies have focused on prices and consumers, which is important, and the Amazon example shows that we’ve had weak enforcement of those policies, and that’s let companies increase prices across the board. We’ve also talked about how consolidation creates other problems, particularly for American workers. You know, whenever these companies merge, the corporate executives like to talk about the new “efficiencies,” and what they usually mean by that is they’re going to lay off workers and cut wages

So as companies grow more dominant, they have more and more power to lay off workers and to cut wages with no real consequences for themselves, because they know that as industries become more consolidated, workers have fewer alternatives. This means that employees who are subject to increasingly harsh, dehumanizing working conditions, a worker can’t just move to a better job if there’s no other available employer. This is called monopsony power, and our antitrust laws need to better address this. 

So Ms. Brown, if I can, I’d like to ask you a couple of questions here. You work for Amazon Fresh, and lots of people order their groceries for delivery within a few hours, never think any more about it. But there is a grueling process that happens behind the scenes to accomplish this feat. Can you explain how conditions at your warehouse have changed during the pandemic?

Ms. Brown: Absolutely. So, I’m going to paint a picture for you about what the process looks like. So as soon as you go on the website and you click the ‘Place Your Order’ button, it causes a chain reaction of people running around the warehouse to gather everything. So it’s a small team of those who, you know, they’ll initially be looking at the numbers and everything, and pass it down to another squad of people who are then running around a warehouse the size, you know, that’s bigger than a football field, to then gather those items. Then it goes to an even smaller team, that’s usually at a max of, say, five people, to package those items out. And then it goes to an even smaller amount of people where they’re responsible for sorting everything depending on where it’s going, on a conveyer belt. Then it goes to my people, where we work on the dock, and we’re responsible for sorting thousands of those orders that get to us every day for eleven hours, making sure they get on the trucks and making sure it gets to the customers as intact as possible. So, now, the human toll in all of this is basically, we have very few to no breaks, we work until our bodies are basically, they’re past the emergency stop button. We delay bathroom breaks, we miss lunch, we can’t miss work, and during the pandemic, you have a lot of us that, you know, we’re burnt out, so a lot of us, me included, we would literally take thirty seconds to just kind of cry it out for a little bit and then get back to it. And then when you go home you don’t even have the energy to take care of your family, if you have kids or you have family members that are dependent on you, things such as cleaning the house or cooking for yourself basically become nonexistent on days that you have to work. 

Senator Warren: So this sounds really grueling. I know that during these challenging times, many people across a lot of different industries have considered quitting their jobs and finding better employment. However, Amazon is continuing to grow like no other, especially while small retailers and small local businesses are closing. So let me ask, Ms. Brown, if conditions are this bad at the Amazon warehouse, what other employment options do you and your coworkers have to be able to support yourselves and your families?

Ms. Brown: Well, Black and brown people in my particular neighborhood, a lot of my coworkers, we don’t really have very many options open to us out here in New Jersey. Most other jobs out here are warehouse jobs or retail, and those don’t pay enough. Amazon pays just a big more than them so we’re stuck being taken advantage of in warehouses like this. This is what they bank on. They know we have no other choice, so they continue with the lack of regulation and everything to protect us. 

Senator Warren: Right. So you’re right, it’s not an accident. You know, as the largest employer in your industry, equipped with massive power, Amazon can pressure other companies to follow suit with its poor labor standards—or they just put those companies out of business. 

Now, it was announced last week that the Amazon facility in Bessemer, Alabama, that workers there are entitled to hold a new union election, and if that election is successful, this would be Amazon’s first union ever in the United States, but I want to ask about the other side of that — what it’s like to negotiate with Amazon if you don’t have a union on your side. Amazon claims, and for this one I actually want to quote Amazon on it, they claim that “direct connection between managers and associates” is “the most effective way to understand and respond to the wants and needs of Amazon employees.” Now, it’s certainly “effective” for Amazon’s bottom line, but Ms. Brown, can you tell us how “effective” this “direct connection” that Amazon talks about, negotiating with Amazon without a union, has been for you and for your fellow workers?

Ms. Brown: Okay, so my colleagues and I have been fighting for change at Amazon for years, and instead of listening to us and working with us to find a solution, they tend to double down and continue to exploit us. That’s continually why we speak out to improve working conditions, and for executives to take us seriously. You know, going against Amazon, especially when, say, you’re going to be written up or something, is kind of like trying to defend yourself in court. It’s not going — it’s usually not going to go too well. 

Senator Warren: Well, I’m very concerned that the workers who are most at-risk during the pandemic are more likely to be women, are more likely to be people of color, and of course, it varies, depending on the job.

So, if I can, this is the last thing I want to ask you here, Ms. Brown, as a Black woman, what have you observed about Amazon’s treatment of racial minorities and women?

Ms. Brown: So now, Amazon, they will hire any and everyone, that’s true. But, depending on what race you are, that’s going to determine whether if you can get promoted and, sometimes, what you’re going to be doing. Most of the workers are Black and brown, and very few of us hold high positions in the company. And it shows in the promotion process. They will promote only enough Black and brown people so that way it looks okay, but mostly they hire white managers out of school who have never actually worked for Amazon, versus hiring the majority of their workforce as Black and brown, and promoting us upward when we know the process. They really don’t, when they do promote you, the pay is definitely different from those who get hired from outside, so if you’re a Black and brown worker, usually when you make manager, you know, internal promotions, you get a lower wage compared to someone who is going to be coming from outside that’s going to be getting a higher wage. And women, it’s even more scarce to really see us in any kind of leadership roles with any of the same responsibility and respect. They’d rather promote, usually, a white guy over someone that looks like me. 

Senator Warren: Well, I appreciate your testimony, your coming in to talk to us about this. All of this suggests to me that if we really tackled the dominant power issue by fighting abusive employer practices, by limiting mergers that would harm workers, and by empowering workers to unionize, we could accomplish two important goals at the same time: we could strengthen the American labor force and the middle class, and we could advance racial and gender equity. Vigorous competition enforcement would be better for all Americans who work and better for all Americans who purchase goods.

So thank you very much for your testimony, Ms. Brown, I really do appreciate it.

Closing remarks below and video HERE:

Senator Warren: I think at this moment, the United States is at an inflection point. Wealth and income disparities are at levels that we have not seen in our lifetimes. The government’s lax enforcement of antitrust laws during the past few decades is a huge part of this problem. Regulators and judges have allowed merger after merger, and the result is too little competition in US markets. Dominant firms in technology are free pretty much to do as they please, including on data collection. They can raise prices, they can reduce wages, and they can threaten our privacy, all so that they can boost their profits to their shareholders and make their CEOs richer.

You know, I am encouraged that the Biden administration is committed to stronger enforcement actions across agencies and committed to promoting competition. But Congress has to step up and do its part, too. 

It is time for Congress to finally update our antitrust laws. We should ban all mergers involving huge corporations. The biggest companies need to compete on the merits. They need to offer better products, better prices, better service – not just buy up their rivals and then gouge consumers.

And second, we must give our antitrust agencies better tools to break up the anticompetitive deals that are most harmful to our economy, like Facebook’s acquisition of Instagram. And finally, our competition policy must safeguard our workforce. Those deal “synergies” that reduce corporate costs often come out of the hides of American workers. Real people with families to support who deserve to work with dignity are paying a huge cost when mergers reduce competition.

More than a hundred years ago, our first competition laws were not designed to promote efficiency or increase consumer welfare. They were designed to protect the people from being at the mercy of economic kings who could exploit workers and customers at their whims. Those laws were also designed to protect our democracy from the corrupt influence of giant corporations. Congress needs to do its part to once again make our economy more competitive.